Why It’s Time to Re-Think IT Funding Models! – Part 1 of 3

Posted on May 18, 2011 by Vaughan Merlyn

The Live 3rd Rail!

Recently, a colleague said to me about a client, “It’s time to raise the subject of their IT funding model.  The current model is causing all sorts of dysfunctional behaviors!”  My response was, “You are right – but I really don’t want to go there just yet.  I don’t think they’re ready to hear that message, or, more importantly to tackle the ‘live third rail’ and do anything about it!”

I’m not particularly proud of my response – in some respects, it was ‘wimping out’ on an important client conversation.  On the other hand, I’ve had mixed results over the years in getting clients to tackle this issue.  Let me be clear – getting agreement that the funding model is broken and is driving dysfunctional behaviors is always an easy sell.  In just about every client I’ve ever worked with, the funding model is clearly broken!  In some cases, it’s slightly broken.  In most cases, it’s badly broken, with all sorts of bad behaviors as a result, including inefficient consumption, underspending on IT infrastructure, lack of value realization, an overly conservative IT portfolio, and so on.  But few CIO’s have the courage to tackle funding models – with so many battles to wage in the name of realizing business value from IT, the funding battle just seems too big, hairy, complicated and politically charged to take on.

Where I have had success, it has usually been thanks to one of a couple of conditions for success:

  1. There was a strong partnership in place between the CIO and the CFO, or…
  2. The CEO (or Chairman, or Board) recognized that the IT funding model was broken and wanted to change it to drive the right behaviors

What’s Wrong With IT Funding Models Today?

Actually, most of today’s IT funding models are riddled with problems, but the biggest issue is that they DON’T DRIVE RESPONSIBLE CONSUMPTION BEHAVIORS!

  • Many IT services are essentially “free” (recovered as overhead costs and corporate ‘taxes’) leading to irresponsible behaviors.
  • Other services that could increase the business value of IT (e.g., consulting services to identify and leverage high value opportunities for IT activities and investments) are dis-incented  (i.e., too scarce, too expensive, or, in many cases, not even available).
  • Most pricing models lack transparency.  The ways that services are packaged and priced hide the cost drivers from the business consumer.  As a result, the consumer has no idea how to manage these costs, and wonders why IT bills fluctuate so widely.
  • Most pricing models don’t reflect business value – often the bulk of the IT bill is for services seen as low value (e.g., basic desktop support).
  • Some pricing models are just too complex!  If the clients don’t understand what they are paying for, why, and what they can do to control costs, the model is broken.  If clerical effort is being expended around the company to check on, decipher and challenge every IT bill, then the model is broken!

Decomposing the Funding Model

So, before we talk about how to change funding models, let’s take apart the underlying components and issues.

Pricing vs. Recovery

The first and most obvious distinction is between pricing – how we price IT services – and recovery – how we recover IT costs.  These are completely separate and distinct – and yet, sometimes get commingled unnecessarily.  Just because a services costs you $x per unit to deliver does not mean you have to charge some function of $x, or charge by the same units as the costs are incurred.  You may chose to ‘give away’ some services, or to charge different clients at different levels, or charge based upon units different from those you pay by.  Recognizing this separation between pricing and recovery gives you tremendous pricing flexibility – and the ability to think about consumption behaviors you’d like to drive, and price accordingly.  Then you can tackle the recovery side of the equation separately – and adjust pricing levels and recovery strategies to balance the budget, as it were.

IT Savvy vs. IT Literacy

The “IT Savvyness” of business managers and executives is a crucial factor in any and all IT value discussions.  This term was first coined by Professor Peter Weill at the MIT CISR.  It is quite distinct from the more common concept of IT literacy.  I can say that Fred is IT literate – he knows his way around Windows and the main Microsoft Office products and successfully installed his own WiFi local area network in his home.  This does not necessarily mean that Fred is an astute steward of IT resources – understanding how IT can really differentiate his business area.  Nor does it meant that Fred can appreciate the distinction between one-time and full life cycle costs.  Bill, on the other hand, struggles with his PC.  But he does appreciate the need for ongoing investment in IT infrastructure.  He does realize that the business owns the accountability for extracting value from IT investments.  Bill might not be very IT literate, but he’s quite IT savvy!

Business-IT Funding Principles

I’ve mentioned Principles in many other posts – they can be a great tool for surfacing some of the tough strategic choices, and then making those choices explicit.  Business-IT Funding Principles do this for the strategic choices around IT funding.  For example, one of my favorite IT Funding Principles is;

We optimize IT investments for the enterprise – not for individual business units.

Or, if you prefer:

We optimize IT investments for the individual business units rather than for the enterprise.

I don’t care in the abstract case which one of these you pick, but pick one and stick to it!  Hopefully, the one you pick will be consistent with your agreed business model, and the degree to which that model calls for common processes and/or shared information.

A less contentious example of an IT Funding Principle is:

Business units directly fund both business-specific IT projects and the steady-state IT expenses associated with the outputs of these projects, rather than funding common activities via corporate contribution or standard allocations.

The rationale for this Principle (all Principles should state the rationales behind them!) would be that IT capital and expenses should be funded by the party best able to manage the demand for the IT services and thereby the cost.  An implication of this Principle (all Principles should articulate their implications!) would be that services that are specific to a business unit, such as third-party maintenance fees, other maintenance support, desktop costs, and IT labor for service requests, should be borne by those business areas that consume the services and are best able to justify the cost relative to business value.

We will pick up on the underlying IT Funding components and issues in the next post.

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An IT Management Lesson from Open Heart Surgery

Posted on April 19, 2011 by Vaughan Merlyn

I realized a few months into blogging that nobody seemed to notice or care how frequently or regularly I posted.  The good news was, people seemed to notice when I wrote a post, but did not notice when I did not – very comforting!  For those keeping score, my last post was March 31st.  On April 1st I left home at 4:15am to be admitted to the Fuqua Heart Center at Atlanta’s Piedmont Hospital.  At 7:30am I entered the OR to undergo Open Heart Surgery (quintuple bypass).  I guess that gave me a little air cover for a couple of weeks to take time off from blogging!

To be honest, while I now know far more about open heart surgery than I ever cared to, I still know virtually nothing.  I’m pretty squeamish about such things – whether or not I’m the subject or simply an observer.  But some things were quite apparent from my recent experience, and I found myself drawing lessons from them – perhaps by way of making sense of what was going on and what I was feeling, perhaps as a self-distraction from the reality of my situation – but also because I’m an inveterate learner.  I love real life analogies!

The Power of Clear, Consistent Communications

First, let me say that in researching the Fuqua Heart Center and my designated surgeon, I discovered that they are ranked in the top 5% of such facilities in the US – a very comforting thought.  (By the way, I went from experiencing mild chest discomfort during exercise to taking a treadmill stress test to undergoing a cardio catheterization to going under the knife over about a 2 week period, so thankfully, there was not too much time to do the research or fret about my situation!)

First, I noticed that each and every interaction with everyone I came in contact with at the hospital (during the catheterization procedure, several other diagnostics including X-Rays, Carotid Doppler Ultrasound and more blood samples and needle pricks than a human should have to endure!) followed a very predictable and consistent pattern:

  1. Whoever was dealing with me would introduce themselves by name and describe their role.
  2. I’d be asked my name and date of birth.
  3. They would scan my wristband.
  4. I’d then be told in layman’s terms what was about to happen and why.
  5. I’d be asked if I understood and had any questions or concerns.
  6. The procedure would be checked while I was still at the testing station (e.g., was the X-Ray image clear).
  7. Typically, I’d be told the procedure has produced a good result and what next step to expect.

This pattern became a sort of underlying mantra to everything that happened.  This was extremely helpful.  First, the rhythm itself set expectations, and seeing those expectations consistently, rigorously met was confidence inspiring.  Second, in each specific case, the calm, clear communication reduced the fear and anxiety.  Even for the operation itself, following extensive preparation, several doctors, nurses and specialists came to the pre-op area and introduced themselves and their role. (It seemed like a cast of thousands!).  Once I was wheeled into the OR, the rest of the team introduced themselves – the cast of thousands doubled in a heartbeat!  (Excuse the pun!)  I was reminded of the times my client’s business executives complain to me that any meeting with IT invariably involved a room full of IT specialists – leading the executive to speculate on why IT costs so much.  I have to say, lying in the OR about to be put under for 5 hours of open heart surgery, cost and the size of the cast was the last thing on my mind!

Business-IT Communications

I thought about my IT clients, and my experiences on the receiving end of help desks and support staff – more often than not being treated as an annoying bystander.  “What are you doing to my PC?” I’d ask as the support tech would whiz through operating system settings, changing things in a seemingly random approach!  “Don’t worry – you don’t need to know – let me get on with my job.”  Under such circumstances, even if their ministrations solved the problem, I’d be uncomfortable, wondering what had they found and how had they fixed it?  If it happened again, I’d be none the wiser.  Plus, there was always that nagging doubt that whatever settings they’d changed had introduced some new problem to be subsequently uncovered!

Another simple trick used at Piedmont Hospital was the effective use of a whiteboard next to my bed.  Understand that as a patient, you interact with many individual nurses and support staff over the course of a 5 or 6 day hospital stay.  Two shifts per day, at least two types of nurse in regular attendance, plus specialists (endocrinologists,  phlebotomists, etc.)  It can be overwhelming to the poor patient trying to remember everyone’s name, let alone how to reach them.  At Piedmont Hospital, there is a whiteboard next to the bed, and every new staff member, upon introducing themselves, would write their name, function and cell phone extension number on the white board.  Again, it was not just that this was a thoughtful, helpful and comforting practice – it was the consistency with which it was done.  Everyone had clearly been thoroughly trained!

Again, I thought about my IT business clients, and their common complaints about meetings with IT involving way too many IT people without any clear explanation of why each one was there.  Certainly, IT organizations need to do a better job at streamlining the business-IT interface.  But, cleaner, clearer introductions of the IT people and their roles in a meeting (in business understandable terms) would go a long way to managing expectations and increasing business understanding of and confidence in IT.

I’m very pleased to say that 18 days after surgery, I’m well into what is forecast to be a  6-week recovery period.  I’m looking forward to reengaging with my clients – armed with a new set of pipes – and a renewed sensitivity to business-IT communications practices!

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Leveraging the Cloud to Accelerate IT Renewal – Part 3

Posted on March 30, 2011 by Vaughan Merlyn

This is the third and final part in a three-part post on how Cloud Computing can provide a fast path to “IT Renewal.”

What is IT Renewal?

In the first post in this series, I discussed how information and technology are becoming ever more central to what an organization does and how it does it and how consumer technology is beginning to have a dramatic impact on enterprise IT. I referred to the actions an IT organization takes in response to these changes as “IT Renewal.”

In Part 2, I described three major opportunities for Cloud Computing to accelerate IT renewal:

  1. Finding and validating new business opportunities.
  2. Improving existing business capabilities.
  3. Transforming how IT capabilities are managed and deployed.

I wrapped up the second post focusing on opportunity #3 from the list, arguing that IT Management is becoming a distributed activity that exhibits many of the characteristics of complex systems, where:

  • Organization is a natural, spontaneous act;
  • Emergent structure trumps imposed hierarchy and control;
  • Creativity arises from variety and randomness;
  • Relationships, porous boundaries, free flows of information and self-reference are essential to survival and growth.

These complex system characteristics lend themselves to the use of collaborative approaches to managing IT work – what I referred to as the “Five C’s” of Information Management.

The “Five C’s” of Information Management

As the management of information and technology becomes increasingly distributed and complex, five types of management activity emerge as important to the way work is done:

  1. Collaborating
  2. Coordinating
  3. Connecting
  4. Co-creating
  5. Coalescing

Enabling the “Five C’s” in the Cloud

Because each of these activities is increasingly being conducted across time and space and across organizational boundaries, enabling them through flexible, scalable cloud solutions becomes an attractive proposition.

As an example, I’m currently working with a client who is refining their IT Operating Model so as to enable a new, growth-oriented business-IT strategy. They had determined that they wanted to support their IT work and forge stronger business relationships using Microsoft SharePoint. However, they are currently on SharePoint 2007 and recognized that they needed to move to SharePoint 2010 as their preferred collaboration and knowledge management platform. However, the upgrades to servers, licenses and related IT infrastructure was going to take 3-4 months, and a significant capital outlay. But, they did not want to lose the momentum they had already established in developing the new business-IT strategy.

As an alternative, we were able to set them up with a cloud-hosted SharePoint 2010 instance over one weekend, with zero capital outlay, and a very modest monthly cost that scales with the number of users, and therefore with the value delivered. Now, they are creating new levels of organizational clarity, establishing a continuously improving IT Operating Model, and experiencing new ways of working – collaborating, coordinating, connecting, co-creating and coalescing, against a set of Cloud-based software services.

Let’s take each of these in turn and see how they can help you “manage IT in the cloud.”

Collaborating on IT Work

Much IT work is performed through teams – increasingly distributed across geographies, organizations and time zones. This change forces a shift in work management from a document-centric (write-attach-email-review-attach-email, repeat ad infinitum) to a more collaborative Wiki-based approach, which has significant advantages:

  • Wiki’s are inherently non-linear and encourage a ‘constructive informality’ that improves quality over time, drives organizational clarity and reduces or eliminates redundancy and contradictions. Wiki’s (well-managed!) let you stop wondering, “Is this the latest version? What was changed since the last version?”
  • Wiki’s encourage multi-author collaboration. Whereas the typical document-centric approach has one or two main authors with everyone else in a review role, Wiki’s encourage a more collaborative approach to authoring – with higher engagement and understanding in the content.
  • A Wiki approach dramatically simplifies search and discovery. The ability to hyperlink, tag, and use a well-factored semantic Wiki leads to content that is far more accessible, intelligible and searchable for all stakeholders.
  • There are many good Wiki products available as SaaS, including SharePoint, Confluence, and MediaWiki.

Coordinating Activities in Time and Space

As IT work becomes more distributed, the need to coordinate activities in time and space becomes both increasingly important and challenging. And again, SaaS offerings are ideally suited to helping distributed teams coordinate their activities, including:

  • Real-time communication and collaboration – e.g., IM, Google Wave
  • Collaborative Project Management – e.g., Bamboo, BaseCamp
  • Desktop videoconferencing – e.g., Go To Meeting, WebEx

Connecting People and Ideas

The need to identify and connect people and ideas is important to innovation and learning. As IT work becomes more distributed, cloud-based SaaS solutions become effective ways of connecting people and ideas, through tools such as:

  • Social Networking – e.g., FaceBook, LinkedIn, Plaxo
  • Mind Mapping – e.g., MindMeister, WebBrain, Bubbl.us
  • Virtual Electronic Whiteboards – e.g., FlockDraw, Colabopad
  • Social Network Analysis – e.g., Netminer, InFlow
  • Innovation James – roll your own using a combination of cloud-based services

Co-Creating Experiences

As business and IT converge, opportunities emerge to co-create experiences with customers, consumers, suppliers, business partners, etc. New types of SaaS solutions for co-creation include:

  • Modeling and Simulation – e.g., Creately, FlexSim, Second Life
  • Prototyping – e.g., iRise, Dreamweaver
  • Virtual Worlds – e.g., Second Life, There.com (currently closed)

Coalescing Around Ideas and Reaching Consensus on Decisions

With the increasing distribution of IT work comes the need to poll stakeholders, tap into sentiment, coalesce around ideas and reach consensus around decisions. And new approaches and supporting tools emerging into this space, including:

  • Polling – e.g., Survey Monkey, Kluster, IdeaScale
  • Group Decision Making – e.g., Resolve
  • Prediction Markets – e.g., NewsFutures

Summary

One the one hand, the increasing complexity of the world of IT management, and the convergence between the work of professional IT organizations and their customers and consumers can seem like a daunting challenge for IT leaders – a threat to the order, security and stability they have worked so hard to achieve over the last 50 years of enterprise computing. On the other hand, the shift to the “information prosumer” and the distribution of IT work is forcing a new way of managing IT activities – across organizational boundaries, across geographies and across cultures.

Just as these shifts are taking place, the Internet as a computing platform and the rise of Web 2.0 and 3.0 capabilities promise a new set of rapidly evolving tools – available as Web services – accessible from mobile devices – and affordable by even the smallest business or even the individual consumer.

I believe these Cloud-based IT management capabilities offer a way for IT leaders to step ahead – to take the lead in learning how to deploy and take advantage of these services – and help to drive business-IT convergence for their organizations.

Illustration courtesy of Suzanne Lebeda at Adirondack Artists’ Guild

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Leveraging the Cloud to Accelerate IT Renewal – Part 2

Posted on March 22, 2011 by Vaughan Merlyn

This is the second in a three-part post on how Cloud Computing can provide a fast path to “IT Renewal.”  (Note:  This post was originally written for the Cloud Commons).

Why IT Renewal?

In the first post in this series, I discussed how information and technology are becoming ever more central to what an organization does and how it does it. I further argued that consumer technology is beginning to have a dramatic impact on enterprise IT – no big news unless you’ve been hibernating for a few years!

With the increasing significance of information and IT, the rapid spread of consumer IT and continued economic doldrums, business leaders are scrambling for any edge they can find to drive business growth and innovation, while keeping costs under control. It’s not just the consumer technologies (e.g., smart phones, tablet computers, sensors) being recognized as potential tools in the competitive battles for customers – it’s also the new workforce with their comfort with IT and expectations for new ways of working (e.g., instant messaging, presence computing, mobile everything.)

How The Cloud can Accelerate Renewal

So, why might Cloud Computing represent an important vehicle for delivering IT services? I see at least three major opportunities for Cloud Computing to accelerate IT renewal:

  1. Finding and validating new business opportunities.
  2. Improving existing business capabilities.
  3. Transforming how IT capabilities are managed and deployed.

Let’s take these in turn and explore how Cloud Computing might fit into your situation.

Finding and Validating New Business Opportunities

Cloud-based services make it relatively easy for a business to experiment with new products, services and even new business models. Not having to procure or build costly infrastructure can reduce or even eliminate capital outlay. It can speed time to market and ensure future flexibility as market conditions and competitive responses change.

Short lead times, the ability to more closely align costs with benefits and the flexibility to scale up or down as needed represent an attractive value proposition for those wanting to explore the unknown. And an added attraction for using the Cloud to explore new business opportunities is that the need to integrate with existing systems and data will typically be less than that associated with replacing or upgrading existing solutions.

Improving Business Capabilities

This can be a more challenging play than the renewal situation above due to the need for interfaces to existing systems. But it can still represent a worthwhile approach, especially if current capabilities are lacking. If you’ve been diligent about Service Oriented Architecture, interfacing legacy applications with Cloud services should not present a significant challenge. If you’ve been proactive around business analytics and data warehousing, again, building necessary data interfaces should not be a reason to break a real sweat.

However, if you are behind the curve on SOA and business analytics, moving existing solutions to the Cloud might be more challenging. On the other hand, now might be a good time to catch up with the state of the art, and see what you’ve been missing in modernizing and virtualizing existing systems.

Transforming How IT Capabilities are Managed and Deployed

This is the Cloud play I am personally most excited by for several reasons:

  • Traditionally, true to the “cobbler’s child” syndrome, IT organizations are typically quite lacking in their own use of IT – managing IT capabilities and assets via Excel spreadsheets, email and lots and lots of meetings!
  • As I’ve noted before, moving to the Cloud is inevitable – the only question for CIO’s and the IT professionals that report to them is, “Will we lead the shift or be left in the dark while our business clients and customers race to the Cloud?” Leveraging the Cloud for internal IT purposes is one way of getting ahead of the game, at least in terms of learning and experience.
  • I believe the nature of IT work, with its complexity and knowledge intensiveness, lends itself to a more collaborative and networked approach, which in turn lends itself to a Cloud-based platform.

So, how can IT organizations leverage Cloud services for internal use? First, we should recognize that as business and IT converge, the management of IT assets and capabilities is becoming both more complex and more distributed.

IT Management as a Distributed Activity

Roles that were traditionally held by IT professionals, such as business analytics and application configuration are devolving into the business units. IT professionals are assuming new roles such as sourcing management, information brokering and enterprise architects. Alvin Toffler, in his remarkable 1980 book The Third Wave, postulated that the separation of production from consumption was an unnatural act, and that technology would over time enable us all to become ‘prosumers’ – producing ourselves what we needed to consume. The Cloud truly opens the door to the age of the Information Prosumer.

IT Management as a Complex Activity

As IT management expands beyond the traditional roles of the IT professional to the emerging roles of Information Prosumers, the complexity of our IT environments is increasing. How can we turn the increasing complexity of the IT environment to our advantage?

The study of complex systems offers some important insights into this question. It teaches us, for example, that organization is a natural, spontaneous act and that emergent structure trumps imposed hierarchy and control. It reveals that creativity arises from variety and randomness. It highlights the importance of relationships, porous boundaries, free flows of information and self-reference.

These clues point us to what I refer to as the “Five C’s” of Information Management – Collaborating, Coordinating, Connecting, Co-creating, and Coalescing. And these Five C’s, it turns out, are ideally suited to Cloud-based services.

In the next and final part of this short series, we will drill into the Five C’s of Information Management, and how Cloud Computing represents a fast path to realizing these characteristics.

 

Image courtesy of Forex Learning Journal

 

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Leveraging the Cloud to Accelerate IT Renewal

Posted on March 2, 2011 by Vaughan Merlyn

(Note:  This post was originally written for the Cloud Commons).

This is the first in a multi-part post on what I’m referring to as “IT Renewal.”  Some people call this “IT Transformation” or “IT Transition”. Others don’t name it – they just do it as a natural part of how they run and continuously improve the ‘business of IT.’

The Convergence of Consumer IT and Business IT

Information and technology are becoming ever more central to what a company (or government, or any organization) does and how it does it. IT for the consumer world (think iPhones, iPads, Kindles, Facebook, eBay, and so on) and IT for the business world are converging. After all, business people are consumers, their customers are consumers, and how we navigate our personal lives spills over into our business lives and vice versa. And as the new workers join the workforce, they do so with an IT literacy and a set of expectations about how they will work, collaborate and communicate.

These consumer devices and services not only allow us to do our work in different ways (think mobile, for example), they also allow us to do different types of work (think sentiment analysis – what are our customers, prospects, competitors, et al saying about us? Or location-based marketing. Or participating in communities of interest or practice.)

The Changing Roles of the Corporate IT Organization

The convergence of business and consumer worlds is beginning to have a dramatic impact on corporate IT. Imagine the following scenario.

Mary, a sales and marketing Vice President, approaches her IT organization with a request to implement a CRM solution. “Yes – we can do that. It will take about 2 years to do, but we can’t get to it until next year. And it will cost about $20 Million, give or take 30%.”  Mary then sees an ad for ‘CRM in the cloud’ and calls the vendor. “Yes, we can get you started today. It’s probably best to start with a pilot group, which we can do for $40 per user per month. We can then bring the cost per user down as you scale up the number of users. And you get a 30-day free trial to make sure our solution fits your needs.”

So, what’s Mary going to do? She’s been charged with driving up sales and she’s convinced that a CRM solution is a key tool to do so. Easy choice, right? She goes ahead with the cloud solution. Variations on this scenario are playing out every day. The more visionary IT leaders are partnering with the Mary’s in their companies, and helping them chose the right vendor and deal with issues such as privacy, security, data ownership and so on. The less visionary leaders are in denial – the cloud is a passing fad. Mary’s going ahead with the Cloud solution anyway. The only question is, does she do it behind Corporate IT’s back, or with their blessing, help and guidance?

The Need for IT Renewal

In the previous paragraph, I used the labels ‘more visionary’ and ‘less visionary’. I could have use the terms ‘renewed’ and ‘un-renewed.’ Or, ‘transformed’ and ‘un-transformed’. Progressive IT leadership is working at repositioning the IT organization as a business enabler – no matter how and where IT capabilities are sourced. In many respects, the core IT roles are shifting towards Enterprise Architect and Integrator, rather than manager of data centers and server farms, developers of systems and software and managers of projects. This shift is what I’m referring to as ‘IT Renewal.’

The Cloud is Both a Driver – and an Enabler of IT Renewal

So, the key roles of an IT organization are being changed by the inevitable emergence of the Cloud as an option in the delivery of IT services. Can the IT organization also leverage the Cloud to enable and drive IT Renewal?

The answer is, I believe, a resounding, ‘yes’. And doing so is essential for getting ahead of the curve for all the Mary’s in our companies. When Mary comes to us, the first answer should be, “Yes, Mary – we can help you deploy a CRM solution. We’ve been investigating Cloud solutions for this type of need, and I think there are some very attractive options we can get you started with almost immediately and without massive capital outlays.” Even better, we approached Mary before she approached us, and told her about the potential for a low cost, relatively easy way to boost sales with a CRM capability.

Leverage the Cloud for Things You Can’t Do

I’ve been participating in a series of CIO Forums across the US, sponsored by Microsoft Windows Azure. It’s been a fascinating experience!  Much of the discussion in our panel Q&A’s has been around the challenge of moving legacy systems to the Cloud. While this might be an interesting cost reduction play, the best cases I’m seeing out there are about using the Cloud for things you can’t easily do today (such as helping Mary lift sales with a Cloud-based CRM!) And that is where I believe the path to IT renewal can begin, or, for those who are already on that path, can be accelerated. More in the next post in this series.

 

 

 

 

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The Decline and Fall of the IT Organization?

Posted on February 23, 2011 by Vaughan Merlyn

With apologies to Ed Yourdon for my plagiarism of his original the book title, published back in 1993, “The Decline and Fall of the American Programmer“.  (Though I don’t recall if Ed gave apologies to Gibbon for first using this line!)

For a blog entitled “IT Organization 2017″ and for a management consultant who has had a very satisfying professional career consulting to IT organizations, the title of this post may seem both extreme and inappropriate.  However, I use the title not just as a controversial ‘hook’ to attract readership, but as a sincere expression of what I think is happening today – and will continue to do so.  The traditional role of the IT organization is on the decline and will never return to the importance and business value impact it had over the last 50 years.  The good news is, there is a crucial new role emerging – and for IT leaders that can envision and lead the new possibilities, I believe there’s a bright new future – perhaps brighter than the traditional IT leadership role.

So, Who Screwed Up the IT Organization?

I’m not sure this is anyone’s ‘fault’ per se, or could have been avoided.  Rather it is a natural by product of technological evolution.  Back in the late 1800′s, many corporations employed Chief Electrical Officers.  Nick Carr gets into this nicely in his aptly named book, “The Big Switch.”

A hundred years ago, companies stopped generating their own power with steam engines and dynamos and plugged into the newly built electric grid. The cheap power pumped out by electric utilities didn’t just change how businesses operate. It set off a chain reaction of economic and social transformations that brought the modern world into existence. Today, a similar revolution is under way. Hooked up to the Internet’s global computing grid, massive information-processing plants have begun pumping data and software code into our homes and businesses. This time, it’s computing that’s turning into a utility.”

The shift from electricity as a highly specialized resource to commodity took about a decade as standards such as voltage, alternating current, plug and socket configurations, and so on were settled.  Once the standards existed, businesses could simply plug into a grid – electricity became a commodity, and the Chief Electrical Officers become extinct as the Dodo.

An Historical Perspective

The first commercial mainframe computers, the LEO were created in 1951 by J. Lyons and Company, a British catering and food manufacturing firm.  The idea of a food and catering company today designing and building it’s own computer is unthinkable!  I remember in the late 1960′s, businesses such as Massachusetts General Hospital were creating their own programming languages, data base software and teleprocessing monitors – activities that would be considered wholly irresponsible today.  I wonder if 15 years from now we will look back at the turn of this century and be bemused by the fact that typical companies of any size at all maintained IT organizations – in some cases, thousands of IT professionals – writing programs, tending help desks, and so forth.

So, What’s Happening to the IT Organization?

For many years the annual surveys of top CIO issues list business-IT alignment. It’s a noble and challenging goal – and it’s no longer the right goal! A combination of technology advances, advances in standards and architectures (mostly prompted by the Internet revolution) and the increasing IT literacy across the business means that the challenge has moved beyond Business-IT Alignment to Business-IT Convergence.

From Business-IT Alignment to Convergence

Let’s drill further into this convergence phenomenon. Today, many IT activities, including project management, information analysis, application configuration are devolving into Business Units while others are consolidating with support functions such as HR, Finance, etc.  Helping to drive this is the rapid consumerization of IT devices and services, with iPhone’s, iPads, Android devices and the like becoming an important window into business systems and information.  Further driving this is the increasing ‘IT Savvy’ and confidence with IT that business executives, line managers and workers (especially, knowledge workers) increasingly feel.  This is in part generational – people entering the workforce with high IT literacy, and in part a byproduct of people’s engagement through social media, e-commerce and so on.

From Owning to Sourcing IT Capabilities

The last decade or so has seen a shift from owning all needed IT capabilities (data centers, server farms, software teams, application development groups, desktop support, etc.) to sourcing these capabilities externally.  Today, traditional functional outsourcing is being continuously expanded, and now often includes Business Process outsourcing as well as the outsourcing of compute power, data storage, IT infrastructure, applications and platforms through the rapid rise of Cloud Computing.

Information is Becoming both Strategic and Implicit

Information is becoming an increasingly strategic asset.  There is compelling research data showing how companies are successfully embracing and competing on business analytics.  At the same time, data is also becoming implicit to business management and operations – increasingly representing what the business manages and how it manages. In many respects, the context for IT today is becoming less about IT and more about information – the ability to capture, integrate, interpret, predict, and act is increasingly the holy grail of competitive advantage – and that belongs in the business – not in a separate specialist group.

So, Where Do IT Capabilities Belong?

Now, I’m on dangerous ground, because the answer depends – on the nature of the business, IT savvyness of business managers and knowledge workers, and their vision for how they want to deploy and manage information and IT.  But, I’d argue that many IT capabilities belong in business operations.  For example:

  • Business Process Management
  • Business Analytics
  • Project Management
  • Satisfying Business Unit application needs

Other IT capabilities belong in the governance of the business.  This might include, for example:

  • Enterprise Architecture
  • IT Strategy
  • Portfolio and Program Management

And finally, some IT capabilities should be centrally coordinated and shared. Examples here include:

  • Common and shared IT Infrastructure
  • Enterprise Applications

So, What Are the Implications for IT Leadership and the IT Professional?

I will save that for a follow-up post, but suffice it to say that most companies and their IT organizations are not quite ready for the shift I’m espousing (and, indeed, predicting).  And, I think it is the clear responsibility of IT leadership to help lead this revolution – ensuring that it is orderly and safe – ensuring that the business and IT professionals are fully prepared and able to take advantage of business-IT convergence.

Please join me in the next post on this topic – and in the meantime, please weigh in with your perspectives and observations.

Painting by Joseph-Noël Sylvestre: The Sack of Rome by the Barbarians in 410

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Service Measurement Index – An Unexpected Silver Lining?

Posted on February 14, 2011 by Vaughan Merlyn

Like it or not (for what it’s worth, I like it a lot!) Cloud Computing is here to stay, and as I’ve stated before in this blog, it is going to change a great deal of the IT landscape, including the future profile and role of corporate IT groups.  But there are some indirect consequences of Cloud Computing that in of themselves could have a profound impact.

How Can You Measure and Compare Service Providers – Including Yourself?

What does it really cost you to deliver a given service?  How does that cost change as you adjust service quality parameters?  How does it change if you incorporate elasticity into service quality – allowing, for example, for peak loads to increase by a factor of 100 on, say, Valentine’s Day?

These questions have never been easy to answer.  Even with attention to Service Management, and with the use of frameworks such as the IT Infrastructure Library (ITIL), most IT shops are not great at measuring these things.  Then, along comes Cloud Computing, with some very appealing value propositions, and potentially, a quick way to offer business services, flexible service levels and agile platforms.  Just how well do the various cloud vendors perform?  How can you compare one vendor against another – or against your internal service capabilities and performance?

To help answer these questions, there’s a new game in town called the Service Measurement Index. According to the Cloud Commons web site:

Hailed as an industry first, the Service Measurement Index (SMI) is a set of business-relevant Key Performance Indicators (KPI’s) that provide a standardized method for measuring and comparing a business service regardless of whether that service is internally provided or sourced from an outside company. Designed to become a standard method to help organizations measure business services based on their specific business and technology requirements, the SMI enables individual preferences to be the basis for what defines a good service.”

The SMI framework, originally created by CA Technologies, was recently transferred to the Cloud Service Measurement Initiative Consortium (CSMIC) to be independently developed and run.  The CSMIC is a consortium of academic institutions and representatives of business and government that is led by Carnegie Mellon University – source of the Capability Maturity Model Integration (CMMI).  The CSMIC currently comprises four Working Groups:

  • Service Characteristics & Definitions (includes Taxonomy)
  • Measures and Metrics
  • Literature and Relationship Review
  • Adoption and Strategy

The SMI Framework

The SMI Framework provides an holistic view into the entire customer experience for cloud service providers in six primary areas:

  • Quality
  • Agility
  • Risk
  • Capability
  • Cost
  • Security

Somewhere between JD Power & Associates and Consumer Reports, the SMI promises to provide a standardized way to describe, measure and, ultimately, benchmark service providers using ‘apples to apples’ comparisons.  Users of the SMI Framework should be able to compare cloud service vendors against their specific business and technology requirements.  They should also be able to make real-time decisions about where and how best to migrate or deploy an application.

Tackling the Largest Part of the IT Budget

While the White House attempts to reign in an ever expanding budget deficit by nibbling around the edges, most IT shops realize that the largest component of their budget goes to “keeping the lights on and the trains running on time.”  Making a serious dent in this budget could free up money and resources for higher value activities.

The jury is still out as to whether cloud computing will live up to all its claims for cost-effectiveness, but with the SMI, at least over time we will have the means to make those comparisons and make informed decisions about how best to source computing resources and services.

Join Me In a Live Conversation About The Cloud

As a reminder, I head out this week across the US for a series of CIO Forums about Threats and Opportunities In The Cloud.   Please click on the link for details and to sign up for this event!

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‘Social’ IT Management – Part 3

Posted on January 27, 2011 by Vaughan Merlyn

In Part 1 of this series on ‘Social’ IT Management, we discussed the inherent complexity of the IT management function, and how a more ‘social’ and emergent approach can represent a better way to manage IT.  In Part 2, we talked about the types of things that would be in a ‘Social’ IT Management Platform and the advantages of such a platform for enabling this social approach.  In this 3rd post in the series, we will discuss some Principles my esteemed colleague, Roy Youngman and I have found helpful in moving to a Social approach to IT management.

Some Principles for ‘Social’ IT Management

Over the course of several client engagements, Roy and I have developed a short list of principles to guide the way we help a client move towards a ‘social’ approach to IT management:

  • Create a baseline quickly, set the quality bar high, and make rapid, incremental improvements thereafter.
    • Rationale: The emergent and more parallel process implied by a social approach can feel a little intimidating at first.  “Will I look like a fool?  How will my co-authors react?”  We’ve found that the best way forward is to “Just do it!”  Get started, and damn the torpedoes!  But also, don’t ask people to begin with a blank slate.  While some clients are o.k. starting from scratch, most prefer a starting point – a straw dog, if you will.  Having said that, it’s important to make it clear that the straw dog is just a starting point – that the expectation is that this will be refined into something we can really use and be proud of!
  • Follow a ‘cascading’ approach – deploy in waves, starting with IT leadership, rapidly engage Process Owners, then members of Centers of Excellence, and finally everyone.
    • Rationale: To be frank, there is something “1.0″ about this cascading approach – it’s rather top-down which flies in the face of a truly emergent, egalitarian and collaborative approach.  But most organizations have a hard time jumping from the “1.0″ to the “2.0″ paradigm.  So, we’ve found a “1.5″ approach to be a useful interim state.  It acknowledges the special role of the IT leadership team, and the reality of engaging them first.  It also puts them in a better position of experiencing the new approach and being able to model desired behaviors.  The trick is not to get stuck in a mode where everything has to start with the IT leadership team.  Get the process owners appointed early (they usually already exist, even if that role has not been formalized) and they in turn will engage process teams.  Typically, there are Centers of Excellence or Communities of Practice that are already blogging and participating in wikis (the IT architecture community is often an early adopter) so it is a natural to bring them into the tent.  Just be careful to not shut down their activity by legitimizing it.  They thrive as a 2.0 collaborative community because that was a truly emergent practice for them.  Legitimizing this practice as “leadership sanctioned and monitored” can shut it down, or drive it back underground, so don’t be too heavy handed in this sanctioning – shine a light on it, but not a floodlight!
  • It is far more important to instill pride-in-workmanship than to install a complex review and control process.
    • Rationale: Coming from the 1.0 world, it is natural for leadership to want to place controls all over the wiki environment.  I recall one client executive, when I first described the plans for their ‘social’ IT management, looking aghast, and saying, “You aren’t seriously suggesting we’d let stuff go up on the Wiki before it was fully vetted and approved?”  This is a natural reaction, but must be resisted.  The power and wisdom of the crowd to shape and continuously improve is relentless – if you let it be!
  • A Power-Law Distribution is expected and good; a few will contribute a lot and some will contribute little, but everyone has something worth contributing.
    • Rationale:  There’s no way around this.  It’s a well-researched and documented phenomenon.  Your major contributions will be limited to a small proportion of the IT organization.  Many will seemingly be bystanders.  The fact that they aren’t in the Wiki every day, participating in discussion threads, creating Wiki pages does not mean they aren’t participating or getting value from the it – they are.  Don’t be put off by it – just accept it and be thankful.
  • Leaders must demonstrate their commitment ‘by example’ while avoiding the temptation to criticize (which will be initially easy).
    • Rationale: Early on, people will look to IT leadership to see if they are “walking the talk.”  If they are, others will join the revolution.  If they are not – this too shall pass!
  • Consistency is a key to success; if every content page looks different, the Social platform will not create a sustainable social web.
    • Rationale: The emergent properties are a good force to tap, but can be a double-edged sword.  We’ve seen many clients with SharePoint (or Lotus Notes way back) where people were encouraged to participate. And participate they did – in spades!  Before long there were SharePoint sites everywhere – each with their own structure and style.  Pretty soon, the collaboration ecosystem is un-navigable.  You have to strike a balance between emergent and structured – and consistency in style and structure are important to sustain this.  Provide templates to make it easy for people to conform to a common style.  And have active Collaboration Managers and Wiki Gardeners whose role includes encouraging a clean and consistent style.

We will end this 3-part series here – but please keep an eye open for upcoming posts that further explore our work in this space.  Or ping Roy or me for a discussion on how this might apply in your organization.

And, of course, please comment on your thoughts and experiences – this is an emerging space, and we all have lots to learn about social means to improving IT management!

Graphic courtesy of Literate Web

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‘Social’ IT Management – Part 2

Posted on January 26, 2011 by Vaughan Merlyn

In Part 1 of this series on ‘Social’ IT Management, my esteemed colleague, Roy Youngman and I discussed the inherent complexity of the IT management function, and how a more ‘social’ and emergent approach can represent a better way to manage IT.  In Part 2, we will briefly discuss the types of things that could be in a ‘Social’ IT Management Platform and the advantages of a Wiki platform for enabling this social approach.  Please watch for the 3rd and final post in the series, where we will discuss some Principles we have found helpful in moving to a Social approach to IT management.

So, What Have We Learned from the Experiments?

We’ve learned that we can use tools like SharePoint, Confluence, and MediaWiki to organize the institutional knowledge of an IT environment, which not only improves organizational clarity, but also empowers IT resources to become greater masters of their fates.  Figure 1 below illustrates an example around process knowledge using an extension of the basic SIPOC technique.

Figure 1

The tool can capture information about IT processes, the roles people play in the performance of a process, the competencies these people need to be successful in those roles, a description of the deliverables a process produces, and much more.  The approach handles best-practices across the IT industry so any one IT department doesn’t have to reinvent-the-wheel.  And the whole thing serves as a collaboration hub that encourages community ownership and continuous improvement of practices, processes and so on.

A Wiki Core

At the core of the collaboration hub is Wiki technology.  We’ve also learned from our recent work that Wikis are rare in IT organizations, in large part because corporate organizations are heavily invested in “documents” as the means for developing, codifying, and sharing knowledge.  Paradoxically, we’ve discovered that this “document-centric” approach is both the main reason why Wikis are rare in the corporate IT world and why Wikis are great for the corporate IT world, so it is worth examining the differences.

From Document-Centric…

Figure 2

Figure 2 above shows how the document-centric approach works. Using MS Office products like Word, a team of people work on a subject (like documenting a process).  Everyone tends to work independently both in the authoring of their assignments or the review of material others have written.  Many versions of the document are created, stored in many places, and passed around in the process.  It is usually a difficult task to consolidate everyone’s input and more often than not, one person has to step forward and take on the bulk of the writing and editing.  When complete, there is little desire or motivation to change it for the better because creating it in the first place was so painful.  So it stagnates.  Eventually, other documents are written that contradict portions of the old document, confusing the few people who do know how to find them and take the time to read them.

…To Wiki-Centric

 

Figure 3

The Wiki approach shown in Figure 3 above is distinctively different.  Unlike a document, which is designed to be self-contained and read from beginning to end, a Wiki is nonlinear.  Using a design such as that described in Figure 1, the content can be well-factored, thereby minimizing redundancies and preventing contradictions that confuse people.  The nonlinear approach also allows people to focus and contribute to whatever area of expertise each person happens to have.  When multiple people have similar subject knowledge or interests, they find each other naturally in the process and synergy happens.

As a hub, the Wiki enhances the discovery of knowledge and exposes the subject matter in the greatest need of improvement.  The Wiki approach supports “divergent-thinking” (which is essential to allow anything to improve) through focused conversations and social measurement techniques. It also supports “convergent-thinking” (which is essential to ever arrive at clear conclusions) through the version control and workflow features inherent in Wiki technology.  The clear advantage of the Wiki is its ability to depict the best portrayal of knowledge currently available at any time while constantly encouraging a community to expand and improve it.

The contrast between Figures 2 and 3 is dramatic.  Corporate IT has a lot of investment in the document-centric approach.  But the return on that investment has been dismal and most IT people will testify to that.

So why then are Wiki’s still so rare in the Corporate IT world?  As is often the case when dealing with unfamiliar territory, “better the devil you know” is the typical rationale.  Ah, but this excuse is starting to fail in corporate IT departments.  Why? Because other departments throughout the business are discovering the benefits of Wikis and getting ahead of IT – the cat is out of the bag!  Many progressive CIOs have seen this trend and want to create an IT organization that enables Social Business rather than just reacts to it.  They want to better manage and leverage the knowledge trapped in their organizations and in tens of thousands of documents lost in personal and shared drives.

In spite of the inherent difficulties, we applaud such vision and have developed a set of principles we have found helpful in moving to a Social approach to IT management.  We will present next in the third and final post of this series.

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‘Social’ IT Management – Part 1

Posted on January 24, 2011 by Vaughan Merlyn

I want to use a multi-part post to discuss some ideas and report on recent experiences in bringing a ‘social’ approach to managing Information Technology.  First, some context.

The Rise of Enterprise 2.0…

The term Enterprise 2.0 first surfaced in 2006, attributed to Harvard Business School Professor Andrew McAfee.  Wikipedia defines Enterprise 2.0 as:

the use of “Web 2.0″ technologies within an organization to enable or streamline business processes while enhancing collaboration – connecting people through the use of social-media tools. Enterprise 2.0 aims to help employees, customers and suppliers collaborate, share, and organize information. Andrew McAfee describes Enterprise 2.0 as “the use of emergent social software platforms within companies, or between companies and their partners or customers”.

The term quickly took hold, spawning speeches and several major conferences dedicated to the subject.  Vendors of social networking tools and platforms proliferated and it seemed we were in for a revolution in the ways business was conducted and managed.

…And Fall of Enterprise 2.0?

Well, it makes a good headline, but I’m not sure “fall” is quite accurate.  However, Enterprise 2.0 has not exactly sustained its momentum, even though there have been some moderate success stories, and, in fact, “social” approaches are gradually creeping into business practices across a wide spectrum of industries.

From ‘Enterprise 2.0′ to ‘Social Business’

Recently, the term “Social” seems to be replacing Enterprise 2.0 as the term du jour to describe business enablement through social-media tools.  See, for example, Harold Jarche‘s excellent piece on Social Business on the Edge of the Chasm, or CIO Magazine’s How ‘Social’ is Taking Over Business.   To quote from the Jarche piece:

Social business is about a shift in how we do work, moving from hierarchies to networks. The highest value work today is the more complex stuff, or the type of work that cannot be automated or outsourced. It’s work that requires creativity and passion. Doing complex work in networks means that information, knowledge and power no longer flow up and down. They flow in all directions. As John Seely Brown said, you can only understand complex systems by marinating in them. This requires social learning. Complex work is not linear. Social business is giving up centralized control and harnessing the power of networks. It is as radical as was Taylor’s Principles of Scientific Management in 1911.”

The IT Organization – The Epitome of Complexity!

As a researcher, student and practitioner of IT organizational design for nearly 35 years, I’ve long recognized the complexity inherent in IT management.  For example:

  • We manage to three very different value propositions – some of what we do is managed according to Operational Excellence principles (e.g., IT operations); some is managed for Customer Intimacy (e.g., business relationships) and some for Product Leadership and Innovation (e.g., opportunity discovery).
  • We have to ensure that new technologies coexist with legacy systems and infrastructures against the relentless drive of Moore’s Law and Gilder’s Law.
  • The economics of sourcing is constantly shifting with the rise of India, China, Eastern Europe, South America and other loci of low cost software development.
  • We have to deal with the ‘consumerization of technology’ as devices such as smart phones and tablet computers cross over from the home/entertainment space to the business realm.
  • We have to deal with immature funding and demand management models that often encourage low-value activity or result in a complex legacy of poorly connected systems.

So, it has seemed to me that tools such as MediaWiki, SharePoint, et al should be excellent enablers of IT Management – recognizing the complex nature of this work, and shifting it towards a more networked and collaborative approach.

Early Experiments in Social IT Management

My valued colleague, Roy Youngman and I have long been frustrated with both the process and deliverables from many of our consulting engagements over the years (we started working together over 20 years ago at Ernst & Young!)  The problem with the process was that we would spend most of our time with the CIO and IT leadership team, some of our time with IT managers, and virtually no time with the people actually doing the work.  This always felt somewhat ‘upside down.’

  • First, we weren’t working with the people who had the detailed knowledge of how things really got done.
  • Second, any changes that had to be introduced as a result of our intervention had to cascade from the CIO and IT leadership team on down.  This was a slow process, often involved massive ‘transformation’ initiatives,  leading to mixed results – some spectacularly successful, others disappointing.  By the time the “troops” heard the messages, they were distorted and there was little to no sense of “what’s in it for me?”  So the typical response was, “Keep your head down – this too shall pass!”  And pass it did, reinforcing the belief that strategic change initiatives can be ignored!
  • Finally, the problem with the deliverables from all this strategy and organization design work was often PowerPoint slides, Visio diagrams and Microsoft Word and Excel documents – hardly the stuff that IT organizations should be managed by!

So Roy and I began doing our IT strategy and organization design engagements differently – typically using SharePoint to change the process from a top-down, hierarchical approach to one more collaborative and engaging, and change the deliverables to ones that ‘live and breathe’ and that are central to the way things are managed – wikis, threaded conversations, process models and so on.

So, What Have We Learned from the Experiments?

Tune into the next post in this series…

Image courtesy of Trident Consulting LLC

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